The Euro is trading in a tight range as traders await the comments of European Central Bank President Jean-Claude Trichet following this morning’s central bank policy statement. Investors will be looking for signs that the ECB is moving closer to hiking interest rates. Trichet may mention that data supports a hike in inflation, but that the ECB may not be as aggressive as the market has priced in. This may mean the Euro will feel pressure as investors lighten up long positions. Talk of hiking rates at a steady pace throughout the year may be what the market is looking for.
Technically, the Euro is in a strong position, having taken out a major Fibonacci retracement level at 1.3744 and a former main top at 1.3861. A failure to extend the rally at current levels may mean a retracement into 1.3659 to 1.3604. An uptrending Gann angle is also providing support at 1.3688. On the upside, 1.40 seems to be a reasonable objective today and could become intraday psychological resistance.
Hawkish comments have dominated the trading sessions leading up to today’s ECB policy meeting and Trichet’s monthly news conference. This implies that the market is expecting to hear bullish news. Should Trichet not live up to market expectations, then look for the Euro to retreat.